By Jorge Mariscal of UBS Wealth Management
Over the past 20 years, 700m people have been lifted out of poverty in developing economies. This new middle class should grow another 60 per cent by 2020, increasing total consumption from $8tn to $13.5tn a year.
As the income gap with developed world peers narrows and aspirational consumer values converge, the emerging market middle class will be able and willing to pay for better education, health, housing, and infrastructure. These ‘public’ industries represent the most dynamic areas of the developing world – the new emerging markets to watch in 2015 and beyond.
Mass transit in Asia is an excellent example. The number of Asians living in megacities with more than 10m residents will double by 2025, the UN predicts. Meanwhile, vehicle ownership is doubling every five years amid rising incomes, while sharply rising carbon emissions are reducing air quality. Read more
Christmas is a time for giving, but not if you are Australia. Last week the government announced the second big cut in development aid this year, which will reduce its budget by nearly a third.
Having got halfway to the international target of giving 0.7 per cent of GDP in aid, Australia is now projecting assistance to fall to 0.22 per cent by 2017/18. It is a long way from the peak of 0.47 per cent of GDP that Australia gave in aid during the leftist government of Gough Whitlam in the 1970s. Read more
By Daniel Gallucci
Half a world away from snowy Moscow, Russia’s deepening economic crisis is reverberating upon the palm-fringed beaches and castaway islands of Thailand. The droves of holidaymakers from Russian cities visiting Thai resorts are dwindling, deterred not so much by the southeast Asian nation’s military coup earlier this year as by the rout of the rouble.
As the chart below shows, Russians seeking a warm refuge from the prolonged winter of home were relatively unfazed in early 2014 by the mounting political tensions in Thailand that led to the May military coup. Read more
By Rafael Halpin, China Confidential
At the start of his premiership, Li Keqiang drew on an ancient Chinese proverb to explain the task ahead. A Chinese warrior, having been bitten by a snake, cuts off his hand in order to save his body. China’s reform process will be “very painful and even feel like cutting one’s wrist”, Li warned.
Pain has certainly been part of 2014 for the Chinese economy. To a large extent, it has been self-inflicted. Measures to deleverage the shadow financing system, for example, led to a sharp slowdown in credit, which in turn contributed to a drop in home sales. This has resulted in slower growth in industrial output, as well as weaker consumer purchases of cars and white goods. Meanwhile, anti-corruption campaigns have hit spending on luxury goods and services and led to delays in the approval of new projects by local officials. Read more
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By Grace Fan, Trusted Sources
One-third of the way through his six-year term, Mexican President Enrique Peña Nieto has dazzled investors with his ambitious reform record, the cornerstone of his administration’s broader development programme to revitalize the sluggish Mexican economy. But the telegenic 48-year-old leader with a reputation for results-oriented governing has failed to convince his increasingly sceptical domestic constituency that he can deliver the goods.
Tepid GDP growth, devastating security problems, political mis-steps and escalating corruption allegations at the end of the year have embroiled him in the worst political crisis in the two-year history of his administration. Read more
In a dreadful week for the rouble, Alexander Lukashenka, the president of Belarus, has gone out of his way to make matters worse, threatening to suspend the use of the Russian currency in bilateral trading deals.
“If they are buying our products in Russia they can pay in dollars,” Lukashenka told a government meeting in Minsk on Thursday. If Belarus has to deal in the world’s worst performing currency “then it has to be at the exchange rate on the very day, on the very hour. ” Read more
Russian asset prices have taken a severe battering this year and are now ranked as among the cheapest in the world. The obvious question many are now asking is, “is this a good time to buy” or “is there more pain to come” which might lead to even lower prices and valuations in 2015?
Apart from the cheap valuations, the reason why investors are asking that question now is because, during Russia’s previous two recent crises, in 1998/’99 and 2008/’09, we had similar situations where the reasons to continue avoiding the country were overwhelming but it was, nevertheless, exactly the right time to buy. Read more
Tanzania has become the third east African country in as many months to discover the size of its economy is bigger than previously thought, benefiting from a surge of investment from gas explorers.
Tanzania joins neighbours Kenya and Uganda in their hefty upward revisions. Statisticians say the new estimate for the size of the economy in the country of 51m people is $41bn, 32 per cent more than previously estimated and the highest revision leading the east African pack, followed by Kenya (which rose 25 per cent at the end of September) and Uganda (13 per cent, also this month). Read more
China slowdown, collapsing currencies and the double-edged sword of cheaper oil – Jonathan Wheatley and James Kynge of the FT’s emerging markets team discuss the outlook for 2015 in EM countries.
In the pale sunlight of an unseasonably warm December day, Chinese Premier Li Keqiang and Serbian Prime Minister Aleksandar Vucic on Thursday cut the ribbon to open the Mihailo Pupin Bridge, spanning the Danube in west Belgrade.
Logistically, the $170m, 1.5km bridge, built by state-owned China Road and Bridge Corporation, is intended to ease traffic in and around the Serbian capital. But Li’s visit to Belgrade has a considerably greater significance – the latest steps in China’s efforts to use the Balkans as a bridge to Europe. Read more
By Taras Kuzio of the University of Alberta
In a Slovyansk café bar this month I received a rude wake-up call about the weakness of western support for Ukraine in the face of Russia’s annexation of Crimea and its aggression in the Donbas. A soldier on a neighbouring table listened in to my conversation in English with a humanitarian aid worker and, when he got up to leave, delivered the comment: “You useless fuckers”. Many more Ukrainians have been dismayed at the weak response from the US, Canada and Europe. Read more
By Jan Dehn, Ashmore Group
As the Fed prepares to hike rates in 2015, the window of opportunity presented by hyper-easy monetary policies for developed economies to undertake deeper fundamental reforms is rapidly closing.
So far, hardly any progress has been made. President Obama’s tenure has not seen the country’s economic problems solved. US trend growth has halved since the 1960s, while the debt stock has doubled to more than 350 per cent of GDP (not counting the further 300 per cent of GDP in unfunded social care liabilities). Europe and Japan recently re-engaged in QE-type stimuli to defend their fundamentally challenged economies from the effects of higher US rates in the future. Read more
By Arthur Bastings of Millicom
Africa watchers frequently comment on how technological innovation on the continent is leap-frogging more developed markets. But now the market is more competitive than ever and companies have to look ahead to anticipate consumer needs and stay relevant. What’s next for Africa’s digital and mobile revolution? Read more
“They’re coming up every morning, just like churches,” Peter Kari, a father of two living in Nairobi’s Kawangware slum, says of the private schools mushrooming in his neighbourhood. “They die as they’re being born. You can wake up one morning and see a tin shack. The other night it was a pub. Today, it’s a school.”
A ride down one of the main roads in Kawangware offers evidence for Kari’s claim. Within five kilometres, there are at least fifteen visible signs for private schools, with names like ‘Brightest Star,’ ‘Top Shine,’ ‘Springs of Wisdom,’ and one (see photo) unfortunately misspelt ‘Havard.’ Read more
By Tony Volpon of Nomura Securities
The Brazilian economy is in a perilous state as it enters 2015. Economic growth is flirting with an outright recession this year. Inflation is oscillating around the upper bound of the inflation target. Fiscal accounts are showing a primary deficit, and measures of indebtedness are rising. The current account deficit is also rising and the country may see a trade deficit in 2014.
External conditions are unlikely to improve in 2015. Brazil was one of the big winners from the Chinese-driven commodity boom, so it is not surprising that many of the problems we see today began with the fall in the country’s terms of trade that began in 2011. Whatever the inadequacies of the policy response, the government does have a point when it argues that external conditions have been a big part of the slower growth seen since 2011. Read more